California Autos Examiner

Wednesday, August 13, 2008

On the heels of my post about the Mazda2 coming to the U.S. market, Ford has a press release about its efforts to improve the profitability of its small cars. As you might recall, yesterday I had discussed that Ford will probably be loading up its small cars with lots of available options in the hopes of improving the average transaction price. Right now Ford can make as little as $100 on a Focus whereas it used to make upwards of $20,000 on its largest pickups. If Ford anticipates that its model mix is going to swing further over to cars, especially smaller cars, then it has to improve its margins.

The great thing for Ford is that people ARE willing to pay big bucks for features. Ford has seen the average transaction price on the Focus rise by about $1,000 since offering the Sync system. Ford is setting up a "customer connectivity team" to further explore what customers are looking for in "smart technology" solutions. In my conversations with Ford officials, they have mentioned that consumer interest for loaded Focus models has increased greatly. Buyers might be willing to downsize, but when they do so they want to make sure they get all the creature comforts they had in their big vehicles. As an added bonus for Ford, it has at its finger tips a raft of nifty options from its European operations where small cars have been able to command higher prices for years.

What are some of the features you’ll see? Keyless ignition is probably a good bet. Ambient lighting packs that bathe the interior in a variety of hues are cheap to fit into a car, but can command several hundred dollars on the sticker. Ford will continue to exploit its lead in in-car electronics with Sync, Sirius satellite radio, Sirius Travel Link, HD Radio, etc. I could also see things like Xenons, LED exterior lighting, adaptive headlights, etc begin to trickle down the model range. Consumers perceive these added luxury touches as affirmations of quality and Ford cashes their checks.